New Obamacare Lawsuit Targets Arizona Gov. Brewer’s Illegal New Taxes

In 1992, after seeing their taxes raised 8 times in 9 years, the people of Arizona overwhelmingly approved Proposition 108, a ballot initiative that amended the state constitution to require tax and fee increases to be passed by a 2/3 vote in each of Arizona’s legislative bodies.  Since then, Prop 108’s supermajority requirement has protected Arizona taxpayers from the kind of special-interest-driven tax increases that typically don't enjoy public support. As a result, Arizona’s tax burden has fallen over the years, to the state's great economic benefit.

Recently, however, as part of a brazen effort to force through Obamacare’s Medicaid expansion, Governor Jan Brewer -- who ran for reelection last year as a staunch opponent of Obamacare -- sidestepped Prop 108 in a way that threatens to eviscerate its taxpayer protections and otherwise violate Arizona’s stricter-than-normal adherence to the separation of powers.

Because the Medicaid expansion will cost Arizona an untold sum, and did not receive the 2/3 majority required for it to raise the taxes to pay for itself, Brewer employed more creative means to raise Arizonans’ taxes: delegating the taxation authority to a state bureaucracy and calling it an “assessment.” This approach takes advantage of Prop 108’s exception for “fees and assessments that are authorized by statute, but are not prescribed by formula, amount or limit, and are set by a state officer or agency.” Interpreted Brewer’s way, the exception allows the legislature to delegate a taxing power to state agencies that the legislature itself doesn't have. If read this way, the exception would forevermore swallow the rule and impose an outcome contrary to Prop 108’s stated purpose.

Accordingly, our friends at the Goldwater Institute last week filed suit in state court on behalf of state lawmakers -- including Rep. Adam Kwasman, a good friend of mine who's now the vice-chair of the Arizona House Ways & Means Committee -- and their constituents, challenging the new tax as a violation of Arizona’s constitution and the state’s separation of powers.  Goldwater argues that the hidden tax violates Prop. 108’s supermajority requirement for new taxes, and that Arizona’s strict separation of powers prohibits the delegation of taxing power to an unaccountable state bureaucracy.

Goldwater is clearly in the right. Prop 108 was adopted for the plain purpose of preventing precisely this type of special interest tax-and-spend behavior -- behavior the people of Arizona will be even less able to oppose if state courts determine that a bare legislative majority can delegate taxation power that it doesn’t itself possess. Brewer’s Medicaid expansion, meanwhile, threatens to take the taxing power out of Arizonans' hands and give it to bureuacrats and the special interests that lobby them.

It will be a shame if Arizona courts permit Brewer’s newfound insistence on enabling Obamacare to effectively neuter a constitutional provision supported by more than 70% of voters. For more commentary on the case, read Josh Blackman.

This blogpost was co-authored by Cato legal associate Julio Colomba.